One of the measures PwC advised multinationals to take was to create a wholly-owned Luxembourg-based subsidiary which would hold the rights to intellectual property used by the rest of the group. The rest of the group would then pay licensing fees to the Luxembourg-based subsidiary which, by agreement with the authorities, would be granted tax relief of up to 80%……

A second tax avoidance mechanism simply involved the companies becoming incorporated in Luxembourg. In 2010, Luxembourg concluded an agreement with several companies of the Socfin (Société financière) agribusiness group, which was founded during the reign of Belgian King Leopold II by the late Belgian businessman Adrien Hallet. The companies chose Luxembourg as their base and made an agreement under which their dividends were subject to a modest 15% withholding tax, a lower figure than those in force where their farms are located (20% in Congo-K and Indonesia, 18% in Côte d’Ivoire).

The art of hiding profits

Altogether, Socfin subsidiaries in Africa[in Sierra Leone, Nigeria, Liberia, Cote d’Ivoire, and Cameroon]and Indonesia produced 123,660t. of rubber and 380,770t. of palm oil in 2012. The combined turnover of its main African subsidiaries reached €271 mn. in 2013. The list also includes the 100%-owned Plantations Socfinaf Ghana Ltd. (PSG) and Socfin-Brabanta (Congo-Kinshasa). Socfin also holds 88% of Agripalma in São Tomé e Príncipe and 5% of Red Lands Roses (Kenya).

A third mechanism involves cross-border lending within a group of companies. Companies registered in Luxembourg are exempt from tax on income from interest.

According to the Thabo Mbeki High Level Panel report between 1980 and 2009 between 1.2tr and 1.4tr left Africa in illicit flows. These figures are most likely an understatement. Multinationals, like the ones highlighted by Africa Confidential, accounted for 60% of these flows.

What is striking and surprising here is just how easy it can be to take over some African states, or large parts of them. The post-independence historical record provides numerous examples where dozens or a few hundred armed men have done it. This is generally just assumed to be the way things are in Africa, but when you think about it it is actually really puzzling. Being the president in African countries (and many others besides) can be an incredibly lucrative deal. Why don’t these rulers, in their own self-interest, take some of that money and use it to build crack units, presidential guards, or strong and loyal army divisions that would protect their hold on power against two dozen putchists, or a hundred or a couple thousand rebels armed with rifles and maybe some mortars?

I don’t think we have really good explanations for this in the relevant Pol Sci literatures. Maybe the most promising hypothesis is that African presidents are so afraid of coups and attacks from inside their regime that they don’t want to support the construction of any organization that would be competent at using force. Keeping the military weak may lower their coup risk somewhat, but effectively trades coup risk off against higher risks of rural rebellion, insurgency, and foreign depredations such as we are seeing in Eastern Congo.

Jim’s concern extends beyond security matters. Much of Africa remains under-governed in other regards as well – tax collection, garbage collection, provision of public goods like water and sanitation, roads, etc etc.

One key driver of this phenomenon, I believe, is the manner in which sectional elites (and those that they purportedly represent) are incorporated into the national system.

You see, many African national governments tend to have a president surrounded by a coalition of ethnic/sectional elites representing specific geographic regions or communities. This sort of incorporation of elites and the regions/social groups that they represent allows African central governments to govern on the cheap since as long as ethnic chief from region X can bring his people and sort of make them feel represented in the centre then the government has no reason to establish a strong presence in the chief’s homeland region (unless that region is economically viable).

A keen observer may ask why co-ethnics of these “ethnic chiefs” never demand for more from their supposed representatives at the centre.

The answer lies in the nature of citizenship in most of Africa. In many countries citizenship (and the associated claims on the state) tends to be mediated through one’s ethnic group. Talk of “our people” is common across much of the region. Even educated people have internalized the fact that you can only get jobs if a co-ethnic is in a high position in government. Everyone therefore invests in having a powerful ethnic representative at the centre that can effectively bargain with whoever is president (or in the core of the governing coalition) to get enough jobs for the boys and girls from back home.

But having such a person obviates the need for the central government to establish its presence at the local level since it is much cheaper to give the ethnic chief his own fiefdom in the name of a cabinet ministry. Barriers to entry allow for very long tenures for these ethnic chiefs thus breeding incompetence of the worst possible kind – like the case of Kenyan police officers accepting bribes from al-Shabab operatives to allow for passage of explosives destined for Nairobi.

From the president’s/government’s perspective, all you have to do to prevent an all out rebellion is be on good terms with enough of these ethnic chiefs or make it beneficial for them to live under your rule.

Seen this way, under-government is not just for the sake of coup-proofing but also an unintended consequence of the manner in which the masses and their representative elites are incorporated into the national government/state.

I am on record as lacking any sympathies for the Kinshasa regime under Joseph Kabila (see here, here, and here). The horrendous situation in eastern DRC is as much his fault as it is of the alleged meddlers from Kampala and Kigali. The fact that the international community has taken to viewing the conflict as primarily regional is a mistake as it masks Kabila’s own failings in improving governance in the eastern DRC . It also gives him a chance to continue free riding on MONUSCO’s presence in the region.

Sadly, the international community appears set to waste this latest crisis by issuing statements and imposing sanctions which will only tackle the symptoms rather than the real problems behind the conflict. As the ICG argues:

If international donors and African mediators persist in managing the crisis rather than solving it, it will be impossible to avoid such repetitive cycles of rebellions in the Kivus and the risk of large-scale violence will remain. Instead, to finally resolve this conflict, it is essential that Rwanda ends its involvement in Congolese affairs and that the reconstruction plan and the political agreements signed in the Kivus are properly implemented.

For these things to happen Western donors should maintain aid suspension against Rwanda until the release of the next report of the UN group of experts, in addition to issuing a clear warning to the Congolese authorities that they will not provide funding for stabilisation and institutional support until the government improves political dialogue and governance in both the administration and in the army in the east, as recommended by Crisis Group on several previous occasions.

In the past, I have speculated that it will be difficult for the M23 to conquer and hold territory, mostly due to their lack of manpower, which started off at around 400-700 and is probably around 1,500-2,500 now. They have been able to rely on Rwandan (and, to a lesser degree, Ugandan) firepower for operations close to the border (in particular Bunagana and Rutshuru, allegedly also this recent offensive), the farther into the interior they get, they harder it will be to mask outside involvement.

Alliances with other groups­­––Sheka, Raia Mutomboki, FDC, etc.––have acted as force multipliers, but have been very fickle, as the surrender of Col Albert Kahasha last week proved. From this perspective, the M23 strategy could well be more to nettle the government, underscore its ineptitude, and hope that it will collapse from within.

However, the recent offensive on Goma has made me consider another, bolder alternative. If the rebels take Goma, thereby humiliating the UN and the Congolese army, they will present the international community with a fait accompli. Yes, it will shine a sharp light on Rwandan involvement, but Kigali has been undeterred by donor pressure thus far, and has been emboldened by its seat on the Security Council. Also, as the looting by the Congolese army and their distribution of weapons to youths in Goma has shown, the battle for Goma is as much of a PR disaster for Kinshasa as for Kigali.

I am currently working on a project on commodities in SSA and have been amazed both by the region’s mineral wealth and how much of it gets stolen by local elites in cahoots with large MNCs. It is one thing to read about corruption from 30,000 feet. Getting an up-close view is another matter. The examples of the two Congos are instructive…

Congo-Brazzaville is one of the top oil producers in Africa. It is also a dirt poor country, with over 70% of its people living below the poverty line. Like in Equatorial Guinea (and other petro-states in the region), the ruling cabal in Brazzaville has turned the country’s oil wealth into private property – the symbol of which is the president’s son’s extravagant expenditures in European capitals (For more details see below).

[youtube.com/watch?v=VpGU1hsuSpU&feature=player_embedded]

These details of the sleaze around oil revenues in Congo were unearthed, by among others, Elliot Associates, a “vulture fund.”

Across the river in the other Congo (Congo-Kinshasa aka DRC) another vulture fund is trying to get Kinshasa to pay up. The vulture fund, FG Hemisphere, paid $3.3m for the debt to a Bosnian state-owned company, and then went ahead and sued for $100m in the courts of Jersey to recover the debt. Recently the Privy Council in the UK, the final appeals court, ruled in favor of Kinshasa. For more on this see the Guardian (here, here and here), which has been following this particularly case closely.

The Democratic Republic of Congo has a mineral wealth estimated to be around $24 trillion. It is also one of the least and poorest governed places on the planet. A recent report indicated that as much as 5 billion dollars in revenue from minerals has disappeared from the state coffers in the recent past.

Should Brazzaville and Kinshasa be forced to pay up?

Opinion over the utility of venture funds is divided. There are those that blame them for going after the poorest countries, asking for taxpayers to pay for their rulers’ (sometimes dead and gone, like Mobutu) largesse. But there area also those who contend that the best way of making rulers less willing to steal is by forcing them to pay up their debts – especially considering that debt forgiveness alone cannot end corruption.

Campaigners have always maintained that if FGH is unable to collect the debt then the money will go instead to public works in the DRC. This is simply not true. The doctrine of “sovereign immunity” applies across the world and it is therefore not possible for any creditor, “vulture” or otherwise, to access funds that have a sovereign purpose – that is, public expenditure. Creditors can only target cash being used to trade.

With this in mind, perhaps the do-gooders campaigning for debt cancellation and recovery of stolen monies could team up with vulture funds. The latter have both the expertise and financial incentive to go after monies hidden in foreign bank accounts and shell companies registered in tax havens. Just a thought.

Angelo Izama, Ugandan journalist (and a good friend of yours truly) has a thoughtful op-ed piece in the Times. He makes the case that:

Campaigns like “Kony 2012” aspire to frame the debate about these criminals and inspire action to stop them. Instead, they simply conscript our outrage to advance a specific political agenda — in this case, increased military action.

African leaders, after all, are adept at pursuing their own agendas by using the resources that foreign players inject and the narratives that they prefer — whether the post-9/11 war on terror or the anti-Kony crusade. And these campaigns succeed by abducting our anger and holding it hostage. Often they replace the fanaticism of evil men with our own arrogance, and, worse, ignorance. Moreover, they blind us by focusing on the agents of evil and not their principals.

At the same time over at FP Nobert Mao, politician from northern Uganda and former presidential candidate, has the following to say:

It’s clear that the aim of the video [Kony 2012] was never intellectual stimulation. I don’t think the founders of Invisible Children are the foremost analysts of the complicated political, historical and security dynamics in our troubled part of Africa. They certainly wouldn’t earn high marks in African Studies. But I will go to my grave convinced that they have the most beautiful trait on earth — compassion.

Such sentiments matter, even today. There are those who say the war is over in Northern Uganda. I say the guns are silent but the war is not over. The sky is overcast with an explosive mix of dubious oil deals, land grabs, arms proliferation, neglected ex-combatants, and a volatile neighborhood full of regimes determined to fish in troubled waters. What we have is a tentative peace. Our region is pregnant with the seeds of conflict. The military action in the jungles of Congo may capture Kony, but we need to do more to plant the seeds of peace founded on democracy, equitable development, and justice. Like peace, war too has its mothers, fathers, midwives, babysitters, and patrons. Perhaps Kony 2012 will help sort out the actors. The video has certainly shaken the fence, making fence-sitting very uncomfortable, indeed.

The two may disagree on the usefulness of tactics such as those that made the now famous video, but they certainly agree on the need to acknowledge agency of local actors in all these problems that require outside intervention.

My two cents on this is that there is definitely room for Africans to shape the narrative and tactics of advocacy in Western capitals (or elsewhere). Emotionally charged mobilization tactics, like Kony 2012, are definitely a distraction from the real issues. But they also present an opportunity for African actors to leverage international attention and support against their own leaders who refuse to deal with problems that affect their daily lives. I am glad that in the case of Kony 2012 Ugandans have stepped in to provide perspective on the narrative and, hopefully, influence the eventual response by the relevant policymakers in DC.

Joseph Kabila was sworn in today as President of the DRC following disputed elections last month. The main opposition has vowed to not recognize him as the legitimate president and are planning street protests. Some analysts believe that there will be blood in the streets of Kinshasa and other major urban centers.

If you think for a moment about the size and diversity of the DRC it becomes clear how hard it will be for the incorrigibly inept enormously challenged Joseph Kabila to be the one to drag the DRC out of its 50 year tailspin.

The truth be told, Mr. Kabila would not do any better running a village mboga kiosk. He is not an autocrat in the mold of Kagame, Zenawi, Museveni or even Sankara. He is closer to Samuel Doe, Bokasa and Valentine Strasser, ineffectual at best and outright disastrous at worst.

Hochschild, author of King Leopold’s Ghost, has an editorial in the Times in honor of Patrice Lumumba, the firebrand Congolese independence leader who was assassinated 50 years ago. His death, amid the chaos of the Katanga secession, marked the beginning of the hellish catastrophe that was the land of Mobutu Sese Seko, and latterly the Kabilas.

Throughout Africa, Lumumba remains a celebrated hero. The many Lumumbas across Eastern Africa are a testament to this fact.

Whether the same would be true had he actually lived to run the vast Central African state is another question altogether. As noted by Adam Hochschild in his piece:

“Patrice Lumumba had only a few short months in office and we have no way of knowing what would have happened had he lived. Would he have stuck to his ideals or, like too many African independence leaders, abandoned them for the temptations of wealth and power? In any event, leading his nation to the full economic autonomy he dreamed of would have been an almost impossible task. The Western governments and corporations arrayed against him were too powerful, and the resources in his control too weak: at independence his new country had fewer than three dozen university graduates among a black population of more than 15 million, and only three of some 5,000 senior positions in the civil service were filled by Congolese.”

The Christian Science Monitor reports on the robbery that most African governments (in this case in the DRC) continue to visit upon their people, unabated. Some of the deals they make sound so bad they’d embarrass a two year old.

Gertler was just 27 when he first became involved in the Congo in 2000, obtaining a monopoly of diamond exports (worth around $600 million) in return for $20 million. He had previously been involved in diamonds in Angola and he is the grandson of Moshe Schnitzer, the founder of the Israel Diamond Bourse. He is now one of the richest Israelis.

Industry insiders, however, suggest that the last big round of mining concession acquisitions happened just before the last elections and helped the president raise funds for his expensive campaign. The next elections are in 2011.

Many of you may not know TP Mazembe, the reigning African club champions. The Lubumbashi (DR Congo) club surprised soccer football enthusiasts the world over by beating Brazilian champions Internacional in the world club championship semi final. They will play either the European champions Inter Milan or Seongnam Ilhwa of Korea in the final. This is the first time that an African side has reached the finals of a major international football tournament.

Just in case you forgot, the Kivus are still on fire. Thousands of people remain displaced. Dozens routinely get killed and raped by both government and rebel forces, and sometimes even by UN peacekeepers. Things are crazy bad out there.

Meanwhile, Kabila and his cabal in Kinshasa remain as ineffectual as ever with no apparent strategy or plan, not just for the Kivus, but for the whole country.

The ICG has this nice report on the Congo. People may not agree on the priorities and approaches of resolving the conflict in the Kivu’s, but this report provides a good background for those who are new to the conflict.

Also check out this Report on the Congo from the Congressional Research Office.

SEOUL (Reuters) - South Korean lawmakers voted overwhelmingly on Friday to impeach President Park Geun-hye over an influence-peddling scandal, setting the stage for her to become the country's first elected leader to be expelled from office in disgrace.

ALEPPO, Syria/BEIRUT (Reuters) - The Syrian army pressed an offensive in Aleppo on Friday with ground fighting and air strikes in an operation to retake all of the city's besieged rebel-held east that would bring victory in the civil war closer for President Bashar al-Assad.

KABUL (Reuters) - The United States will "remain committed" to Afghanistan, U.S. Defense Secretary Ash Carter said on Friday, amid questions about what President-elect Donald Trump's foreign policy will mean for the country as it faces a renewed Taliban insurgency.